Posts tagged ‘Debt’

Give the hawks their due: terrorism is an ongoing threat to the United States. In fact, it’s likely to pose a bigger threat with every year that passes, insofar as technological advances are permitting people with meager resources to obtain ever deadlier weapons. Heaven forbid they get a nuke or a killer virus. What the hawks fail to recognize, however, is that perpetual war poses a bigger threat to the citizenry of a superpower than does terrorism. Already it is helping to bankrupt us financially,undermining our civil liberties, corroding our values, triggering abusive prosecutions, empoweringthe executive branch in ways that are anathema to the system of checks and balances implemented by the Founders, and causing us to degrade one another.

What this doesn’t convey, of course, is the impact of recessions, which would mitigate Reagan and Bush I a little. But what you see, I think, is the impact of supply side madness. Eisenhower managed to reduce the debt burden by almost 2 percent a year. George W “deficits don’t matter” Bush managed to add 1.6 percent a year without a significant downturn. And yet for some reason, the public still associated the GOP with fiscal conservatism. This is quite simply the biggest mass delusion I’ve witnessed in the quarter of a century I’ve lived in America.

Time after time after time, I have listened to little Reps such as Marsha Blackburn and even big pols such as John Boehner attempt to explain their plans for GOP cuts. None have given any plans that are 1) clear 2) rational 3) beyond polemic rants against “government spending / waste” or 4) practical. I am sorry if you voted for this fiscal fraud party last week.

On a similar note, Andrew Sullivan notes that largely this entire midterm election season was about reigning in government spending when the GOP in fact promised to spend more!

“Republicans also should resist pressure to take all defense spending cuts off the table. Newly elected Sen. Rand Paul of Kentucky had the courage to say he’d go after defense waste during his campaign, and I look forward to working with him. We should start by taking common sense steps like freezing defense spending until the Pentagon can pass an audit and remove all nondefense spending from the Pentagon’s budget.

Our nation’s military leaders understand the need to cut spending. As Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, said, “Our national debt is our biggest national security threat.” History shows that every nation eventually adopts the foreign policy it can afford. Taking defense spending off the table is indefensible. We need to protect our nation, not the Pentagon’s sacred cows,” – Senator Tom Coburn (R-OK).

Big ups to Michael Drane for posting this on his Facebook. Tim Wise ends the Tea Party:

In evaluating the Tea Party phenomenon, those of us who insist white racial resentment is at the heart of the movement are often attacked for besmirching the high minded, non-racial motivations of those who identify with this insurgency. So, for instance, we are told that the real concerns of the TP are: deficit spending and big government. Prejudice and bigotry have no part in their efforts, or so we’re told.

And yet, if this were true, the conservatives in the Tea Party would have been screaming at George W. Bush when he was president (and certainly wouldn’t have voted for his re-election, since he eliminated the government surplus that had been created in the Clinton years). They would have called for the resignation of Dick Cheney for saying, famously, that “deficits don’t matter.” They would have supported Al Gore in 2000, since he was a member of the surplus-creating Clinton Administration. They would detest, rather than revere, the legacy of the Reagan years, which boosted the deficit and debt to before-then unheard of proportions.

Wise, in his very short treatise, demolishes each and every pillar of the TP. This is an accessible, worthwhile read. Give it a shot, even if you are a TP backer and read it in full. Shoot me a rebuttal – vgiordano at gmail dot com. I am willing to tango.

The folks of the tea-party movement are clearly upset at what they see as out-of-control spending, and frequently express a desire to slash the size of government. A quick glance at the federal budget is enough to see that military spending is far and away the largest expense after Medicare and Social Security. That fact combined with the observation that America’s titanic military budget is larger than the military budgets of China, Britain, France, Russia, Germany, Japan, Saudia Arabia, Italy, South Korea, Brazil, Canada, and Australia combined is more than enough to suggest to common sense that there’s room here to cut a bit of fat.

The meat within each article centers on the thought of America’s military defending freedom abroad (free trade routes, being prepared for nuclear Iran or the army of China if they put up a fight, etc). While WW entertains hypothetical numbers relating to the military budget and how much we could drop it and still have others capable of keeping order, it is questionable whether the WSJ op-ed supports maintaining the status quo out of a “world wide cop” mentality. In the end, I do not believe that either side makes an overwhelming case for point. One last question for the small government loving Tea Party:

Will it follow the example of the American Enterprise Institute, the Heritage Foundation, and the Weekly Standardandfight, fight, fight for big government, just as long as it’s big government bristling with the tools of conquest and mass death?

Jonathan Chait continues on with the discussion over accusations made by Barack Obama towards George W. Bush and the past decades fiscal issues:

The best way to compare deficits over time is as a share of the economy. This first graph shows budget deficits during President Bush’s tenure. On this graph deficits are positive, so up is bad. The dotted green line shows the average deficit since 1970 for comparison (2.6% of GDP).

This graph does not show “a decade of spiraling deficits.” It instead shows eight years of deficits averaging 2.0 percent of GDP, followed by a horrible ninth year as the markets collapsed and the economy plunged into recession. (Budget wonks who want to understand why I think we should look at nine years for a Presidency rather than eight can read this.) Even 2008’s bigger deficit than 2007 can be mostly explained by a revenue decline as the economy slipped into recession pre-crash. Before the crash of late 2008 President Bush’s budget deficits were 0.6 percentage points smaller than the historic average. Deficits did not “spiral” during the Bush presidency or the decade. The bumped around the historic average, then spiked up in the last year.

It’s true that it’s not literally accurate for Obama to accuse the Bush administration of presiding over a decade of spiraling deficits. The Bush deficit rose, then fell a bit at the peak of the economic cycle, and then shot upward once again as the economy crashed. Likewise, it would be unfair to describe Kirstie Alley as having her weight spiral upwards, when it fact it has risen asymptotically upward. Hennessey has a point here. A tiny, tiny point, but a point nonetheless.

Where Hennessey goes badly wrong is in his attempt to defend the responsibility of Bush’s fiscal policy. Hennessey argues that deficits under Bush were not that high until the end, when they got catastrophically high, but the high point was he fault of the economic crash rather than Bush’s policies. The problem, of course, is that Bush inherited a very sound fiscal position. At the peak of the Clinton-era economic boom, the budget was running a surplus equal to 2.4% of GDP. At the height of the Bush-era economic cycle — “boom” isn’t really an accurate description — the budget ran a deficit of 1.2% of GDP. Which is to say, Bush’s policy of launching two wars, a series of major tax cuts, an expansion of defense and homeland security spending and a prescription drug benefit without any offsets whatsoever structurally increased the deficit by about 3.6%. (Note that this argument assumes that Bush bears zero blame for the economic crisis that concluded his presidency.)

But the lesson of financial crises is that they lead to huge spending run-ups and very often inflation, defaults and general discord. Everybody is citing Kenneth Rogoff these days, who co-authored that history of 800 years of financial crisis. I notice his rule of thumb when it comes to stimulus is “Less is More.”

Besides, I’m hung up on my lack of faith in the idea that stimulus actually works. My impression is that before the crash most economists thought monetary policy was the way to counter economic cycles and that fiscal stimulus tends to be mistimed or ineffective. This was the conclusion I took from a long history of stimulus attempts by Christina Romer, now the Obama economic adviser.

Now, suddenly faith in stimulus is back, not because of new evidence but simply because monetary policy alone hasn’t produced job growth. This, of course, still doesn’t mean than stimulus works in the short term.

But with fears alive of a double-dip recession, Obama warned he won’t slash spending at the expense of an economic rebound – and he lashed out at Republicans for blocking the extension of unemployment benefits and opposing a Wall Street financial-overhaul bill in Congress.

He called the GOP out of touch with the daily problems of Americans.

Obama promised that the matter of trimming deficits would be a priority over the next couple of years, with help from a panel studying how to cut costly safety-net programs.

Still, the president defended as essential both the big stimulus spending and the massive aid given to big banks and auto companies.

House Minority Leader John A. Boehner’s comment that the financial-regulation bill Obama supports amounts to “killing an ant with a nuclear weapon.”

Isn’t it safe to say that both sides of the political aisle are to some degree out of touch when it comes to the daily life of American denizens? I wish I could see into the future or see today how all of the jobs/financial reforms/boosting will pan out.